To the Letter of The

www.captiveinsurancetimes.com

The primary source of global captive insurance news and analysis 23 June 2021 - Issue 226 To the letter of the law Belinda Fortman, Nate Reznicek and Peter Kranz discuss the importance of the relationship between regulators and the industry as well as some of the challenges for US captive regulation

Economic Substance Emerging Talent Economic substance laws were Steve Melton designed to protect the reputation Risk adviser of offshore jurisdictions Central Carolina Insurance Agency | R3 Risk Management

Information about our regulators is available online An uncertain world ocorian.com demands operational agility Our multi-jurisdictional presence and capital markets experience mean we can help you quickly adapt your operations to meet changing market opportunities.

Act with clarity VERMONT CAPTIVE INSURANCE OVER 1,100 CAPTIVES LICENSED

Risk management isn’t about choosing better next time.

When you choose to domicile your captive in Vermont, you can be confident you chose correctly. With nearly 40 years of regulatory experience coupled with an unparalleled service provider network and legislative partnership, Vermont offers companies the sensible, secure and supported domicile they need.

Connect with us and see why Vermont sets THE GOLD STANDARD.

VTC001-20_Captive_Insurance_Times_Full_Page.indd 1 1/13/20 7:30 PM Captive Insurance Times

Issue 226

www.captiveinsurancetimes.com

Published by Black Knight Media Ltd 16 Bromley Road, New Beckenham Beckenham, BR3 5JE

Editorial Editor: Becky Bellamy [email protected] Tel: +44 (0)208 075 0927

Reporter: Maria Ward-Brennan [email protected] Tel: +44 (0)208 075 0923

Contributor: Maddie Saghir [email protected]

Designer: James Hickman [email protected]

Marketing and sales Publisher: Justin Lawson [email protected]

Associate Publisher: John Savage [email protected] Tel: +44 (0)208 075 0932

Office Manager: Chelsea Bowles Tel: +44 (0)208 075 0930

Copyright © 2021 Black Knight Media Ltd All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without permission in writing from the publisher. Company reg: 0719464

www.captiveinsurancetimes.com 3 WE KNOW CAPTIVE INSURANCE.

For more than 70 years, no firm has had a more complete understanding of the captive and self- insured market than Milliman. With our global reach, we routinely advise multinationals on cross-border transactions and how to meet each domicile’s unique requirements—key in today’s captive environment.

milliman.com/captives [email protected]

1349PCP_Captive Review_20200211.indd 1 2/12/20 12:09 PM Contents

News Focus In this issue page 6 Economic Substance

Economic substance legislation was designed

to protect the reputation of offshore

jurisdictions. Industry experts discuss how

Bermuda works to remain compliant

page 12

US Regulation

Belinda Fortman, Nate Reznicek and

Peter Kranz discuss the importance of

the relationship between regulators

and the industry as well as some of the

challenges for US captive regulation

page 14

Emerging Talent Industry Appointments Steve Melton, risk adviser at Central Carolina CIC Services has appointed Shoshanna Insurance Agency | R3 Risk Management Simmons to lead its client services division page 18 page 20

Set up an EU based protected cell with the independent experts Capital, time & cost efficient alternative to a standalone insurer or captive Direct access to the UK and EU market

People you can trust

Atlas Insurance PCC Limited is a cell company authorised by the Malta Financial Services Authority to carry on general insurance business.

www.captiveinsurancetimes.com 5 News Focus

LMG reveals plans to develop and promote UK captives market

The London Market Group (LMG) has published The current Solvency II Review offers the UK an through an international competitiveness duty a five-point plan asking for relevant regulatory opportunity to develop a more attractive regime for UK regulators. and legislative changes to help grow the indus- for captives. try in the coming months and years, and to take Finally, LMG says gaining access to emerging full advantage of the new opportunities open LMG says it would welcome further discus- markets around the world will help them to build to the UK. sions with HM Treasury and the Prudential resilience against natural disasters and climate Regulatory Authority (PRA). Other points in change events through trade negotiations, reg- The plan includes increasing the choice of buy- LMG’s plans include making London a natu- ulatory dialogues and market promotion. ers and growing the market by developing and ral home for foreign (re)insurance companies promoting a UK captives market. by reforming the Solvency II regime. LMG sug- Sean McGovern, CEO of UK and Lloyd’s at AXA gests going through the “additional and unnec- XL and sponsor of LMG’s government relations Currently, there are no captives based in essary” regulatory processes which duplicate work, comments: “Right now, the UK government the UK as it has historically been seen as an work already performed by other trusted regis looking at how financial services should evolve unattractive location. ulators is very costly and time-consuming and in a post-Brexit world, and the London market acts to inhibit overseas firms from operating in wants to seize the moment while there is a will- Outside of Lloyd’s, the UK has no specific regu- the UK. ingness to support positive change that can ben- latory framework for captives, instead treating efit the insurance industry.” them as insurance companies, even though they “The PRA has the ability to resolve these issues are very different entities. within the current framework and without com- “The LMG has taken part in various government promising its own compliance with the Solvency consultations on the future regulatory frame- LMG explains that due to this uncompetitive II regime or the prospects of a subsequent equiv- work and Solvency II. This document will form environment, no company has chosen to set up alence ruling with the EU,” LMG comments. the backbone of a comprehensive campaign by a captive in the UK, despite its extensive financial the LMG, working with ministers, parliamentar- services ecosystem. LMG has also called for the government, the ians and the regulators to reinforce the impor- regulators and industry to work together to rec- tance of the insurance market and to ask for “We believe that there are few barriers to the UK ognise the nature of the large complex risks we what it needs to continue to grow globally. We creating a domestic captives market. Captive cover and the sophisticated corporate buyers we have put forward a five-point plan to support insurance is not defined or referred to in the Irish serve, through a more proportionate approach the UK’s competitive position, grow our exports Insurance Acts or regulations. Instead, the Central to regulation. and deliver increased levels of foreign inward Bank of Ireland uses the definitions of a ‘captive’ investment into both London and across the in Solvency II as the basis and justification for its It also wants to ensure that the London Market regions of the UK, where the market is expanding,” differentiated approach,” says LMG. remains the most attractive home for large risks McGovern adds. ■

6 images by moofushi/stock.adobe.com www.captiveinsurancetimes.com News Focus

Connecticut House passes crumbling foundation bill

The Connecticut House of Representatives has It will authorise the Connecticut Housing Finance structed. The CFSI, a non-profit captive insur- passed HB 6646, which is an act concerning Authority to make loans to CFSI. In addition, it will ance company, was set up in 2017 to distrib- crumbling concrete foundations. require CFSI to submit a report concerning the ute funding to fix the crumbling foundations damage caused by the presence of pyrrhotite in homes on the northeast side of the State The bill, which was first introduced in the January to the concrete foundations of nonresidential of Connecticut. session of the General Assembly and was primar- buildings in the state. ily sponsored by the Planning and Development Earlier this month, CFSI announced that it has Committee, will eliminate the termination date Many homes in Connecticut were built using completed 150 foundation replacements since of Crumbling Foundations Solutions Indemnity concrete made from stone aggregate mined its launch on 10 January 2019. (CFSI), the captive insurance company estab- from a quarry containing pyrrhotite. This results lished pursuant to section 38a-91vv of the gen- in cracks forming in the foundations of many of The bill has been adopted by the house and has eral statutes. these structures, decades after they were con- been sent to Connecticut’s senate. ■

THE MIDWEST’S BEST-KEPT SECRET AT BROWN SMITH WALLACE, our comprehensive tax, insurance and audit services team helps maximize the return on investment for captive insurers. Our integrated approach includes ongoing operational reviews, tax consulting and regulatory audits.

Looking for cost-effective, high-quality services?

Let our team’s industry-leading expertise enhance the performance of your captive program. Contact us today.

BROWNSMITHWALLACE.COM | 1.888.279.2792 | A TOP 100 ACCOUNTING FIRM

www.captiveinsurancetimes.com 7 News Focus

A.M. Best: GCC sees captive interest increase

As international commercial insurance rates “This is prompting large insurance buyers in the A.M. Best says: “Most of these jurisdictions harden, interest in captives is growing in the Gulf region to look for a more cost effective way of have identified three classes of captive — sin- Cooperation Council (GCC) region, according to managing their insurance risks and potentially gle-parent captives, captive with a mandate the latest A.M. Best report. While the global cap- recapturing some of the underwriting profit and to source a limited portion of premiums in tive insurance industry has experienced steady commissions which would otherwise be enjoyed the commercial market and mutually-owned growth over the past decade, the use of captive by external insurance carriers and intermediaries,” captives — with some also identifying a (re)insurers in the GCC countries has been lim- says A.M. Best. fourth class.” ited to date. However, A.M. Best explains that an increasing interest in the creation of new cap- For captive sponsors outside the GCC, low tax “In general, captive-specific regulation in the tives in the region, with multiple potential own- jurisdictions have historically provided parent region has been modelled on international best ers undertaking feasibility assessments or seek- groups with tax advantages through base erosion practice, with similar features to well-established ing regulatory approval. and profit sharing schemes. captive domiciles such as Bermuda and Guernsey,” the rating firm adds. The rating firm highlights that the interest has But A.M. Best says tax savings are not a driver for not only come from the traditional users of cap- the increased captive interest in the GCC as juris- An alignment of factors is creating an attractive tives — the energy and heavy industry sectors, dictions in the region that apply corporate tax do environment for captive development across and state oil enterprises. so at very low rates. GCC, including a hardening commercial (re)insurance market, positive regulatory developments, A wider gamut of companies is now investigating Meanwhile, the introduction of captive-specific maturing risk management among regional com- self-insurance solutions in response to hardening regulation, and the availability of experienced panies, and the availability of professional man- rates in the international commercial insurance third-party captive managers to oversee the agement services. and reinsurance markets. In addition, companies operations, have made the process of establish- in the region are becoming increasingly sophisti- ing a new captive easier. A.M. Best concludes: “A captive insurance com- cated in their risk management. pany can form the centrepiece of a sophisti- Several GCC financial services regulatory author- cated risk management and treasury function Many primary insurers responding to harden- ities have introduced dedicated captive-specific for large industrial groups, giving more visibility ing reinsurance market conditions by opting to legislation recognising the particular dynamic to and control over risk management, retention retain more risk. between a captive and its parent. and transfer.” ■

8 images by monster_ztudio/stock.adobe.com www.captiveinsurancetimes.com Industry Appointments

News Focus

brings 40 years of actuarial experience in the re/insurance industry to Aspen. Tennessee approves captive legislation updates to ‘fuel growing reputation’ Prior to managing his own consulting firm, Tennessee governor Bill Lee has approved the est return on investment possible rather than “Ihe am served thankful as for executive the hard workvice presidentand support and of latest modernisations to the Volunteer State’s allocate money in excess of what is needed to Governorgroup chief Lee, actuary the members at Validus of the Group Tennessee from 2010 to 2019. He also held various senior- captive laws, which is set to fuel its “growing rep- support the potential risk of insurance losses in General Assembly and the captive insur- level roles for Fireman’s Fund, Endurance, utation as a first-choice domicile”. their captive.” ance stakeholders who are helping make and KPMG. Tennessee truly the ‘Gold Standard’ of the South,” The legislative updates include authorising para- Last year was a record-setting year for the sheMark adds. Cloutier, executive chairman and metric insurance coverage and reducing the stat- state’sAndrew captive Kudera insurance has section been as appointed captive pre- group chief executive officer, commented: utory capital needed by protected cell captive miumexecutive volume vice topped president $1.6 billion and the group num- Tennessee“Welcoming Captive an Insuranceindustry-leading Association expert (TCIA) chief actuary of Aspen Insurance of Andy Kudera’s quality to our team insurers to commence operations from $250,000 ber of active captives in Tennessee increased president Kevin Doherty comments: “The TCIA Holdings (Aspen), effective 3 increases our capabilities, allowing us to $100,000, among other improvements. to 146. supports the reduction in the minimum capi- February 2020. to transform our business, simplify and talenhance for protected our operations,cell captives toand $100,000 increase and By reducing the minimum capital and surplus ThroughAspen’s the previous first five group months chief of actuary,2021, Tennessee Paul believesaccountability this will acrosshelp to spurthese significant functions.” growth needed to start protected cell captive insurance hasFrydas, averaged will assume 10 new the captive new formationsrole of chief a in cell captives in Tennessee. The TCIA also companies, Tennessee Department of Commerce month.analytics Fortman officer explains: and will “The lead growth strategic of the believes“Kudera’s it is significantcapabilities that Tennesseeand isfresh lead- pricing, aggregation management and perspective, paired with Paul Frydas’ & Insurance (TDCI) captive sector director captive insurance industry in Tennessee that ing the way now in permitting captives to offer modelling. Frydas will remain chief actuary considerable expertise and experience, Belinda Fortman says: “Tennessee is sending a wefor areAspen seeing Insurance today is aUK, byproduct Aspen Managingof years of parametricwill create insurance a strong that partnership can offer innovative across strong message that we value companies’ free- focusedAgency teamwork and Aspenand the far-reachingBermuda.Kudera vision of wayscomplementary to cover large disciplines,” numbers of insureds he adds. in natu - dom to invest their money to obtain the high- Tennessee’s leaders.” ral disasters or other similar events.” ■

In Utah, we understand that Utah is recognized as an innovative Utah Captive Insurance, companies are sophisticated and state, fostering and supporting able to take greater control of their innovative solutions. If you are 3110 State Office Building, own insurance risks. It is our goal looking for an on-shore domicile to to provide affordable, diverse and form a captive insurance company, a flexible solutions that protect against Utah domiciled captive is the choice Salt Lake City, any company’s dynamic business for you, where Risk Management, Cost environment. Control, and Regulation connect. UT 84114

40 Captive Insurance Times - Issue 192 www.captiveinsurancetimes.com 9 News Focus

Crawford & Company launches AF Group enters reinsurance market A.M. Best affirms Quanta new Japan desk in Thailand through partnership with Waypoint Services captive ratings

Crawford & Company has launched a Japan AF Group, an industry leader in offering A.M. Best has assigned a financial strength desk in Bangkok, Thailand, providing a ded- specialty insurance products, has entered rating of A- (Excellent) and a long-term issuer icated facility to support the growing pres- into the assumed reinsurance marketplace credit rating of “a-” (Excellent) to Quanta ence of Japanese companies and their affili- through a new partnership with Waypoint Insurance Company (QIC), based in Texas. ates in the South East Asia region. Underwriting Management. The ratings reflect QIC’s balance sheet The new Japan desk will be led by Tetsuya Waypoint will begin underwriting property, strength, which A.M. Best assessed as very Fujita, director of Crawford’s Japanese busi- workers’ compensation and casualty treaty strong, as well as its adequate operating per- ness unit. reinsurance for and on behalf of AF Group formance, neutral business profile and appro- beginning 1 July. priate enterprise risk management.

Read the full article online Read the full article online Read the full article online

Armanino and Brown Smith Wallace join eMaxx launches alternative energy BCC: Rise in cannabis companies forces as part of Midwest expansion warranty products through captive looking at captive programmes

Brown Smith Wallace is set to join forces with eMaxx has launched new alternative energy There is ‘significant interest’ in cannabis com- Armanino in order for both firms to broaden warranty products through a variable cost panies looking for alternative ways to deal their Midwest reach, effective on 1 August. captive solution. The suite of warranty pro- with insurance problems, and captives are grammes provide support to manufacturers, a great way for them to look at solving that As part of the expansion, Brown Smith developers and owners for renewable, alter- challenge, according to Patrick Ferguson, Wallace will rebrand as Armanino but main- native and energy efficiency projects by pro- Canadian captive and global life re sales tain its current St. Louis operations. viding an insurance backed solution to prod- leader, Marsh Canada. uct and performance shortfalls backstopped through XOL Quota Share Reinsurance.

Read the full article online Read the full article online Read the full article online

10 www.captiveinsurancetimes.com

Economic Substance - By Maria Ward-Brennan

Keeping order Economic substance legislation was designed to protect the reputation of offshore jurisdictions. Industry experts discuss how Bermuda works to remain compliant

The Crown Dependencies have enhanced In a huge proportion of jurisdictions, corporate “Unlike most other jurisdictions, including the UK, their commitment to meet the Organisation profits are taxed at the domicile of the company. Bermuda actually vets its beneficial ownership of Economic Co-operation and Development’s data, by requiring beneficial owners to sign per- (OECD) principles for improving global tax trans- Louise Charleson, partner at Ocorian, explains sonal declaration forms and to provide proof of parency by introducing an Economic Substance that Bermuda’s economic substance laws and identity and residence (which is reviewed by the Test. regulations are enshrined in the Economic Controller of Exchange),” he adds. Substance Act 2018, the Economic Substance This legislation, which came into effect 1 January Regulations 2018 (both as amended, together Reflecting on how Bermuda works to remain 2019, was designed to protect the reputation of with the ES Regime) and related Guidance compliant with economic substance legis- offshore jurisdictions by ensuring that income Notes issued by the Minister of Finance on 18 lation, Carol Feathers, director of client ser- streams from certain activities are based on September 2020. vices at Ocorian, says that the Bermuda actual local activity to substantiate the use of Registrar of Companies (Registrar) is respon- low tax jurisdictions. One of the other aspects of global tax reform is sible for implementing, monitoring and tax transparency, including cross-border coop- enforcing the economic substance regime. Those that have introduced this legislation eration in identifying assets beneficially owned The registrar has the power to issue notices include Bermuda, British Virgin Islands (BVI), by taxpayers. on an entity to comply with the economic Cayman Islands, Guernsey, the Isle of Man and substance requirements. Jersey. Miles states that Bermuda, for many decades, has gathered corporate beneficial ownership infor- Feathers states: “If the entity fails to do so, the Nicholas Miles, partner for Kennedys, says that mation in a central register, maintained by the registrar can impose civil penalties of up to this doctrine is applied to distinguish transac- Bermuda Monetary Authority (BMA) acting as BD$250,000 in three stages. If, after the civil pen- tions by taxpayers with counterparties particu- Controller of Exchange. alties have been exhausted, an entity continues larly related parties that are designed to exploit to be non-compliant, the registrar may apply to tax rate differentials and which lack ‘economic He comments: “Pursuant to various Tax the court for an order in such terms as it thinks substance’. Information Exchange Agreements and its imple- fit, including an order for striking off the entity.” mentation of common reporting standards and In the context of recent global legislative reforms country-by-country reporting, Bermuda shares “Additionally, there is an offence of knowingly driven by the EU and the OECD, it refers to proof and has shared its beneficial ownership data making a false economic substance declaration that the revenue of a company is sufficiently with authorities of a large number of foreign with penalties up to BD$10,000 or imprisonment attributable to activity in its domicile. jurisdictions where required.” for two years or both,” she adds.

12 images by agcreativelab/stock.adobe.com www.captiveinsurancetimes.com Economic Substance

Impact on captives their offshore operations exclusively through ees or employees of outsourced service pro- a specialist captive management company, a viders. On 6 July 2020, the BMA issued a sim- Bermuda is one of the largest captive insurance more mindful review of whether its substance ilar notice, confirming that in assessing com- domiciles in the world. requirements are met may need to be conducted pliance with the requirement to hold physical to ensure that all key strategic decisions and core board meetings in Bermuda for the period At the end of 2020, the domicile had 680 total income generating activities (CIGA) are taking ending 30 September 2020, it would con- captives on the small island. place in Bermuda,” Charleson highlights. sider all circumstances including registrants’ inability to hold such meetings due to logis- On how this regulation affects the captive insur- tical and health difficulties resulting from ance market, Miles explains that the Insurance Understanding the challenges COVID-19. Act 1978 and associated codes of conduct already contain provisions requiring a substan- Companies have often relied on conducting However, Charleson also highlights that the BMA tial presence in Bermuda, captives benefit from regular physical board meetings in Bermuda to also noted that it expects registrants to continue a deeming provision in the Economic Substance demonstrate ‘mind and management’ and the to conduct their board meetings virtually, by tele- Regulations 2018 (ESR), according to which carrying out of CIGA within the jurisdiction. phone, video. they may comply with the economic substance requirements by complying with certain require- One of the biggest challenges over the last ments applicable to economic substance. year has been the travel restrictions imposed Developments as a result of the COVID-19 pandemic, which Miles outlines that a captive must maintain a Feathers says has prevented entities from being Currently, Bermuda’s economic substance principal office in Bermuda and appoint a prin- able to conduct in-person board meetings locally. law applies to exempted and local com- cipal representative in Bermuda approved by Physical board meetings are also essential for reg- panies, exempted and local limited liabil- the BMA. istered insurance entities to meet their regulatory ity companies, overseas permit compa- obligations,” she adds. nies and partnerships that elect to have a He notes: “They must also comply with var- separate legal personality that carries on a ious rules relating to the outsourcing of On 20 March 2020, the registrar issued a notice, ‘relevant activity’. regulated functions. which acknowledged that business continuity is challenging during this time and as such, where Charleson says it is anticipated that the legis- A captive must file an annual economic sub- meetings or other similar economic substance lation will be revised to extend its application stance declaration (ES Declaration) within six compliance measures are not possible due to to all partnerships, not just those with separate months of the end of its financial year.” travel or quarantine restrictions, this may be legal personality. taken into consideration. For certain captives which require more inten- She comments: “Bermuda’s economic sub- sive administration, such as industry group cap- However, Charleson points out that the regis- stance legislation will continue to develop as tives with multiple policyholders or those which trar also noted that entities must continue to act needed to ensure ongoing compliance with the write third party business including to clients of in good faith and maintain a careful record of scoping paper issued by the European Union’s the onshore parent, Charleson adds these, by all meetings affected, details of restrictions and Code of Conduct Group (Business Taxation) in their nature, are more likely to have palpable steps taken. June 2018.” substance evidenced by dedicated employees and premises. A widely-held view is that companies should “There may also be minor changes relating nevertheless ensure that they have person- to ‘levelling up’ between all offshore jurisdic- “For other captives, such as those with a single nel who are resident in Bermuda to conduct tions to reduce any motivation to ‘island-hop’,” policyholder (its onshore parent) which conduct CIGA, whether this be directors, direct employ- Charleson concludes. ■

www.captiveinsurancetimes.com 13 US Regulation - By Maria Ward-Brennan

To the letter of the law Belinda Fortman, Nate Reznicek and Peter Kranz discuss the importance of the relationship between regulators and the industry as well as some of the challenges for US captive regulation

14 images by diegograndi/stock.adobe.com www.captiveinsurancetimes.com US Regulation

At the start of the 2021 legislative session, many or news within the state or industry that could US captive insurance domicile states introduced impact captive business within the states. “As regulators, our role is new and updated captive bills to their state leg- to ensure that our captive islative process. “By and large these associations are great advocates for the captives within the related domicile insurance companies For example, Alabama’s captive bill amendments, and I would strongly recommend that every cap- remain in compliance which if passed, will see the introduction of three tive owner join their respective domicile associa- new alternative risk vessels, a new formal redo- tion,” says Nate Reznicek, head of US distribution, with our captive laws and mestication process, risk retention groups (RRGs) International Re. regulations and operate as and a reduction to the minimum capital requirements. Meanwhile, in Vermont, governor Phil good corporate citizens in Scott signed new captive bill legislation into law, The regulators which is set to strengthen the state’s captive reg- the market” ulation in a variety of areas. The relationship between the captive insurance industry and the regulators is an important one. Elsewhere, Tennessee governor Bill Lee approved the latest modernisations to the Volunteer State’s Across the US there are different stages of domi- captive laws, which is set to fuel its “growing rep- ciles – some have been around a very long time utation as a first-choice domicile”, while North while others are in their infancy or growth stages. Carolina’s includes two proposed changes affect- ing the premium tax paid by captive insurers. Examining if the regulators have enough knowledge of this niche sector, Peter Kranz, executive However, most notably, a captive bill that would managing director and captive practice leader see the creation of a framework in the State of at Beecher Carlson, says: “I firmly believe almost Washington for registering eligible captive insur- every regulator I’ve encountered has technical ers and imposing a premium tax on the risk cov- competence and knowledge to implement the ered by premiums allocable to the state became regulations of their domicile in an effective way.” law after governor Jay Inslee signed the legislation on 12 May. However, Kranz explains that there are some captive regulators who might be newer to the There are currently more than 30 states in the US industry, or don’t have many captives licensed are very strong and understand the industry and that have captive insurance laws on their books. in their domicile, and perhaps haven’t been the value it brings,” he adds. Though there are many similarities among the exposed to everything and therefore need to states in terms of the captive statutes and how spend some extra time working through a pro- Communication is vital in many sectors, includ- captives are regulated, there are significant dif- gramme structure. ing captives. Belinda Fortman, director of cap- ferences that a captive owner needs to consider tive programmes for the Tennessee Department when they choose which state to establish a cap- “There are also some regulators in the industry of Commerce and Insurance (TDCI), suggets it’s tive domicile. who, say, for example, need to better under- beneficial for captive insurance stakeholders to stand that a letter of credit is a cost-efficient way hear directly from the captive regulators on an The most reputable domiciles have active asso- to capitalise a captive and it doesn’t mean the ongoing basis. ciations that interact closely with their respec- captive owner/parent is too small or not finan- tive domicile regulators. These associations often cially strong – it just might make more financial She notes: “As regulators, our role is to ensure provide regular updates on pending legislation sense. By and large, though, captive regulators that our captive insurance companies remain in

www.captiveinsurancetimes.com 15 Truist Corporate Trust & Escrow Services Our Advantage US Regulation Truist has a long history of trust, escrow and risk management excellence with both domestic and international coverage. If you’re choosing a cost compliance with our captive laws and regula- and not generating captive premium tax or fee within the industry, Reznicek says “absolutely”, effective and convenient collateral trust as part of tions and operate as good corporate citizens in revenue.” however, he notes the challenge has always been Collateral your captive and reinsurance solution, we have a the market.” deciding who/how will do the regulation. broad range of specialties that can help mitigate He suggests that this challenge could become risk in your insurance business: She suggests that regulators also have insights a benefit to those states that understand being To date, the captive sector has largely had to • Collateralized Reinsurance into what’s proven to work and what hasn’t captive friendly creates jobs, high paying jobs, “self-police” with the Self-Insurance Institute of Trust Services • Regulation 114 Trusts including what could be coming around the cor- which create spending and tax revenue in America (SIIA) leading the way by releasing a • Captives ner in terms of new initiatives. their state. Code of Conduct in 2019 with several domiciles • Surety Bonds following shortly thereafter with annual Code • Insurance-Linked Securities • Deductible Trusts “For captive owners and captive managers, this Also discussing challenges, Fortman says that of Ethics and Conflict of Interest requirements. direct contact provides them with a feel for the captive owners are usually not insurance pro- Our expertise is only one aspect of what regulator themselves, and what it could be like fessionals — it’s the captive managers, auditors As much as the industry agrees that there is a differentiates our reinsurance trust business from working with them, which would help in making and actuaries who provide the information that is need to remove these bad captive promoters, other firms. Additionally, we excel because of: the decision on what domicile is best suited to needed to ensure that the captives are operating he suggests there is an equal resistance to the • Single Point of Contact their needs,” Fortman explains. under their business plan. regulation of captive managers. • Comprehensive Servicing • Rapid Response Times She explains that when these industry profes- Reznicek explains: “Domiciles tend to run at, • Team of Reinsurance Specialists The small print sionals are not responsive, provide inaccurate or near, capacity from a workload perspective • Extensive Carrier Relationships information or are not experienced, it makes the and are largely opposed to the additional work With US regulation being very strong, effective, regulators job far more difficult. that would be required. Managers are generally To learn more about how Truist can and easy to understand, Kranz says the challenge opposed to the idea as it would impose addi- support and enhance your collateral is the ‘everything else’ such as direct placement tional reporting/compliance requirements that posting requirements, please contact: taxes, federal income taxes, international laws IRS they may feel are overly burdensome if they oper- and regulations. ate correctly.” Donny Tong The Internal Revenue Service (IRS) has targeted Senior Vice President 212-590-0976 He says: “These can be a bit tougher because micro captives for years, but in more recent times “Unfortunately, this hesitancy allows these sham [email protected] things can come out of the left field.” they have ramped up its efforts to do so, includ- promoters to continue their ways, largely under ing them on its ‘Dirty Dozen’ list of tax scams the radar. Promoter audits, investment compa- Barbara Aubry “For example, Washington State with their cease since 2014, along with other actions. In 2016, the nies owned by related businesses/shareholders Senior Vice President and desist letter to Microsoft or several years Department of Treasury and IRS issued Notice of captive managers, or life insurance/tax-moti- 212-303-4164 back when the Vermont Housing Finance Agency 2016-66, which formally labelled micro captives vated promotion largely go undisclosed to the [email protected] (VHFA) prohibited captives from becoming mem- as ‘transactions of interest’. The IRS advised that captive owner,” he adds. Joseph Monaco bers of any Federal Home Loan Banks, even when these transactions have the potential for tax Vice President they otherwise clearly met the requirements and avoidance or evasion. With each state enacting and enforcing its own 212-303-1746 fit the mission better than other organisations regulatory requirements, Reznicek says this will [email protected] allowed to be members,” Kranz adds. Under section 831(b) of the US tax code, cap- inevitably lead to inconsistent requirements tive insurers that qualify as small insurance com- based on the individual domiciles. He explains that some states that have created panies can elect to exclude limited amounts of their budget challenges, “are chasing dollars annual net premiums from income, so that the “Further complicating matters is the fact that wherever they can find them”. captive pays tax only on its investment income. domicile regulators aren’t in a position to enact changes based upon US federal income tax “It’s a non-business friendly approach which ulti- Examining if there needs to be more regulation issues — which is often at the heart of the issue,” mately hurts their citizens by not creating jobs around captives to block out any bad players Reznicek concludes. ■ SunTrust Private Wealth Management is a marketing name used by Truist Financial Corporation and the following affiliates: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank and SunTrust Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by SunTrust Investment Services, Inc., BB&T Securities, LLC, and P.J. Robb Variable Corp., 16 www.captiveinsurancetimes.com which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Investment advisory services are offered by SunTrust Advisory Services, Inc., GFO Advisory Services, LLC, BB&T Securities, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers. BB&T Sterling Advisors, BB&T Investments and BB&T Scott & Stringfellow are divisions of BB&T Securities, LLC. Mutual fund products are advised by Sterling Capital Management, LLC. © 2020 Truist Financial Corporation. SunTrust®, the SunTrust logo and Truist are service marks of Truist Financial Corporation. All rights reserved. Truist Corporate Trust & Escrow Services Our Advantage

Truist has a long history of trust, escrow and risk management excellence with both domestic and international coverage. If you’re choosing a cost effective and convenient collateral trust as part of Collateral your captive and reinsurance solution, we have a broad range of specialties that can help mitigate risk in your insurance business: • Collateralized Reinsurance Trust Services • Regulation 114 Trusts • Captives • Surety Bonds • Insurance-Linked Securities • Deductible Trusts

Our expertise is only one aspect of what differentiates our reinsurance trust business from other firms. Additionally, we excel because of: • Single Point of Contact • Comprehensive Servicing • Rapid Response Times • Team of Reinsurance Specialists • Extensive Carrier Relationships

To learn more about how Truist can support and enhance your collateral posting requirements, please contact:

Donny Tong Senior Vice President 212-590-0976 [email protected]

Barbara Aubry Senior Vice President 212-303-4164 [email protected]

Joseph Monaco Vice President 212-303-1746 [email protected]

SunTrust Private Wealth Management is a marketing name used by Truist Financial Corporation and the following affiliates: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank and SunTrust Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by SunTrust Investment Services, Inc., BB&T Securities, LLC, and P.J. Robb Variable Corp., which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Investment advisory services are offered by SunTrust Advisory Services, Inc., GFO Advisory Services, LLC, BB&T Securities, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers. BB&T Sterling Advisors, BB&T Investments and BB&T Scott & Stringfellow are divisions of BB&T Securities, LLC. Mutual fund products are advised by Sterling Capital Management, LLC. © 2020 Truist Financial Corporation. SunTrust®, the SunTrust logo and Truist are service marks of Truist Financial Corporation. All rights reserved. Emerging Talent

SteveRisk adviser Melton Central Carolina Insurance Agency | R3 Risk Management

Personal bio: I grew up in McLean Virginia, the son of a ‘sign painter’ from Lenoir, North Carolina who served in World War II, migrated to California and then back east to start a business — he worked in Washington, DC for 40 years. I was fortunate to be able to live a nice suburban life in McLean and how ironic that many of my neighbours were senators, congressmen, lawyers and doctors. Playing baseball became my avocation; I played from little league one through Babe Ruth and industrial leagues, high school and college.

Professional profile: I attended The University of Richmond where I played for three seasons. I ran into the rigours of business school, so I decided to choose school over ball. I graduated from the business school with a BSBA with a marketing major and was a Philp Morris Lyon’s Scholar. After school, I emigrated to Charlotte, North Carolina to work for Travelers Insurance Employee Benefits, back when they were a leader in the industry. I worked in the employee benefits via Lincoln National and BCBS plans. I migrated into commercial lines risk with Zurich/Universal Underwriters in 2001.

My passion is meeting educating and involving others on ways to build their business! I also like to keep fit.

18 www.captiveinsurancetimes.com Emerging Talent

How did you end up in the What are your aspirations for your “There are key players in captive industry? career in the captive industry? the captive world for these I met Tom Kendall from Captive Solutions and I would like to continue to build on my education CRUISe II in Davidson, North Carolina via LinkedIn. and confidence so that at least half my business very sizable markets that Tom helped me understand how finding a busi- revolves around problem solving utilising a cap- can build solutions easily ness purpose first by talking with the company tive in the solution. leaders to better understand their operations, as they have the experience financials and strategic direction helps identify and can learn on the fly” areas where a captive might fit and assist. He What advice do you have for someone advocates being a trusted advisor and educator considering a role in the industry? to companies. Read everything you can. Listen to the leaders that have been in the industry for years, learn

What has been your highlight in how to talk with the C-suite on their business the captive industry so far? and understand the different financial/tax areas they might be in. Had a great discussion/education with a large environmental firm – which has led to their inter- I also think you should learn about the vari- est in furthering a review for the use of a captive ety of solutions/alternatives on how a captive to aid their business. might fit. Attend seminars/webinars and sub- scribe to Captive Insurance Times to stay abreast of the changes that take place around the

What/who have been your influences captive industry. ■ in the captive industry?

Tom Kendall, Artex seminars and Captive “I would recommend Steve Melton as an Emerging Talent in the captive arena as his Insurance Times articles. understanding of traditional insurance is vast yet his desire to learn more about how captives can assist companies is greater.”

What is your impression of the industry? “Steve has learned that you need to understand the business issues first by getting into the understanding of the issues and needs to determine the best solution.” It is a tight community, with the traditional insurance brokerage firms and insurance “From there Steve has learned how to get into the operational, financial and strategic areas carriers. There are key players in the captive that will aid in determining the right design. Lastly, he has learned there is no shelf product world for these very sizable markets that can to walk in the door with but to listen and learn as much as he can in his discussions and to build solutions easily as they have the experi- partner with the right team members in the industry to help with building the right captive ence and can learn on the fly. The knowledge solution for his clients.” of captives is still low in the North Carolina C-Suite. I see tremendous growth potential in this area to provide business solutions Thomas Kendall, president & CEO of Captive Solutions as well as the common insurance trade off carrier/agency solution.

www.captiveinsurancetimes.com 19 Industry Appointments

CIC Services has appointed Shoshanna Simmons to lead its client services division.

Simmons will oversee all aspects of administra- “Not only did CIC Services’ clients with COVID-19 tion and oversight throughout the captive forma- losses have their claims paid, but CIC Services tion, retention and management process. also stood up to the Internal Revenue Service (IRS) and defeated the IRS in a recent 9 to 0 She joins CIC Services with extensive experience loss in the Supreme Court decision IRS versus in risk management and insurance. CIC Services. I look forward to working with CIC Services’ clients, businesses and the thousands of Previously she served as risk manager for The employees they represent,” she adds. Integral Group in Atlanta, Georgia, where her responsibilities included creating and managing In May, the US Supreme Court ruled in favour of the company’s corporate insurance programme the CIC Services in their case against the Internal through individualised risk mitigation strategies Revenue Service (IRS) over Notice 2016-66, in a within enterprise risk management, underwrit- unanimous decision. ing, claims management, property management, safety, compliance and regulatory report- Bryan Ridgwa, CIC Services chief operating officer Escrow Service Customized for You ing standards. and managing partner, comments: “We believe When you choose the Escrow and Specialized Services team at Texas Shoshanna’s background and industry knowl- Commenting on her new role, Simmons says: “I edge will elevate the customer experience with Capital Bank, you will work with an efficient and highly conscientious am thrilled to join a firm that serves middle mar- CIC Services. Not only is she highly experienced, team of Trust professionals. Our veteran team has an average of 20 ket clients and helps them manage their risk and but her customer-centric perspective is also par- protect their businesses.” amount to our corporate culture.” ■ years’ ILS and reinsurance trust experience. Experience how Texas Capital Bank provides a tailor-made solution when acting as your Collateralized Trustee in an ever-changing marketplace.

PMA Companies has named Derek Hopper as executive OUR SOLUTIONS CONTACT US vice president and chief underwriting officer.

Hopper will be responsible for leading the under- Most recently, he was senior vice president, · Captives Bryan Gartenberg SVP, Head of Sales writing, product management and development, shared services. · Collateral Account risk control, and corporate marketing areas. 646.771.8015 Commenting on Hopper’s promotion, Santulli, · Escrow Account [email protected] In his new role, he will continue to report to John says: “Derek Hooper is a talented leader with an · Foreign Exchange Tina Van Ryzin Santulli, president and CEO of PMA Companies. outstanding track record of delivering underwrit- · Multiple Investment Options SVP, Group Manager ing and operational excellence.” 203.449.3292 Hopper joined PMA in 1990 and has held vari- · Regulation 114 Trust [email protected] ous leadership roles in his 30 years at the com- “We are confident that Hooper will drive disci- · Reinsurance and Collateralized pany, including vice president, corporate distri- plined underwriting strategies that deliver excep- Joe Dattoli bution and assistant vice president, commercial tional results for PMA Companies and impactful Reinsurance Trust SVP, Relationhsip Manager 973.650.0921 markets underwriting. solutions for our brokers and clients.” ■ · Sidecars [email protected]

20 www.captiveinsurancetimes.com ® www.texascapitalbank.com Member FDIC NASDAQ: TCBI

TCB Captive Insurance Escrow Ad.indd 1 4/1/21 5:01 PM Escrow Service Customized for You When you choose the Escrow and Specialized Services team at Texas Capital Bank, you will work with an efficient and highly conscientious team of Trust professionals. Our veteran team has an average of 20 years’ ILS and reinsurance trust experience. Experience how Texas Capital Bank provides a tailor-made solution when acting as your Collateralized Trustee in an ever-changing marketplace.

OUR SOLUTIONS CONTACT US

· Captives Bryan Gartenberg SVP, Head of Sales · Collateral Account 646.771.8015 · Escrow Account [email protected] · Foreign Exchange Tina Van Ryzin · Multiple Investment Options SVP, Group Manager 203.449.3292 · Regulation 114 Trust [email protected] · Reinsurance and Collateralized Joe Dattoli Reinsurance Trust SVP, Relationhsip Manager · Sidecars 973.650.0921 [email protected]

® www.texascapitalbank.com Member FDIC NASDAQ: TCBI

TCB Captive Insurance Escrow Ad.indd 1 4/1/21 5:01 PM geb.com

Industry Appointments

Cassie Bachman has rejoined Elevate Risk Solutions as managing director of operations and legal.

Bachman was previously managing director of compliance for Elevate Risk Solutions but “took a brief hiatus to grow her professional legal experience abroad”.

In September 2020, Bachman joined Arsenal Insurance Management as director of legal affairs.

Bachman, who has worked with both government agencies and private industry, has numerous years of experience in the captive industry after coming from the international law sector. have grown to understand and greatly appreci- plement our growing company and team of Commenting on her new role, Bachman says: “I’m ate. I come to the team with tremendous respect seasoned executives.” very excited to join Elevate and help manage the and so much excitement for where we’re going,” growth they’ve experienced this past year.” she adds. Previously at Elevate Risk Solutions, Bachman assisted in several compliance matters and “Working with this team has reinforced the impor- Jerry Messick, CEO of Elevate Risk Solutions, notable captive insurance cases, including the tance of policies and procedures, client commu- notes: “We’re very excited to have Cassie Internal Revenue Service (IRS) versus Delaware nications, and due diligence, especially in our Bachman on board. Her depth of experi- Department of Insurance (DOI) case and the IRS industry. These, among others, are all things I ence and knowledge in our industry will com- Amicus Brief. ■

Hylant Global Captive Solutions has hired Alex Gedge as it expands into the UK. Based in London, Gedge joins as a senior captive consultant. Employee benefits. We have the solutions. Gedge joins Hylant from Marsh, where she served their captives more efficiently and in line

as vice-president of insurance consulting, busi- with their business plan. She has also con- A comprehensive range of Employee Benefits solutions, A multicultural team of professionals providing customised ness development and captive insurance for over ducted feasibility studies to assess whether including Life, Disability, Accident, Health and Pension plans, service, risk evaluation, full technical support, central three years. a captive is a viable solution for a client’s risk for both local and mobile employees. coordination and quality reporting thanks to the most advanced IT tools. management programme. A Network of over 120 world-class local insurance partners, During this role, she has supported com- covering more than 100 countries and territories around the The security and stability of the Generali Group, one of the globe. world’s leading insurance and financial players. panies across classes and industries with Prior to her role at Marsh, she was a captive insur- their captives, offering strategic consulting ance consultant at Willis Towers Watson (WTW) A high-degree of flexibility to meet the group insurance and Along with the traditional multinational pooling options, the pension needs of multinational corporations wherever they GEB Network is leader in Reinsurance to Captive and offers through its life cycle, analysing how to use for more than two years. ■ operate. innovative, cost-efficient multinational pension solutions.

52 Boulevard Marcel Cahen, L-1311 Luxembourg, Grand Duchy of Luxembourg – [email protected] Tel:+352 24 84 46 22 www.captiveinsurancetimes.com geb.com

Employee benefits. We have the solutions.

A comprehensive range of Employee Benefits solutions, A multicultural team of professionals providing customised including Life, Disability, Accident, Health and Pension plans, service, risk evaluation, full technical support, central for both local and mobile employees. coordination and quality reporting thanks to the most advanced IT tools. A Network of over 120 world-class local insurance partners, covering more than 100 countries and territories around the The security and stability of the Generali Group, one of the globe. world’s leading insurance and financial players. A high-degree of flexibility to meet the group insurance and Along with the traditional multinational pooling options, the pension needs of multinational corporations wherever they GEB Network is leader in Reinsurance to Captive and offers operate. innovative, cost-efficient multinational pension solutions.

52 Boulevard Marcel Cahen, L-1311 Luxembourg, Grand Duchy of Luxembourg – [email protected] Tel:+352 24 84 46 C

CMY